The future of e-commerce in penetrating sales of FMCG

Over the past two decades, the FMCG (fast-moving consumer goods) sector in India has witnessed remarkable transformation, especially in terms of adopting online sales across different categories. Facilitated by changes in consumer behaviour, rapid urbanisation, rising disposable incomes and internet penetration, e-commerce has grown exponentially providing growth opportunities to both big and small players in the FMCG industry. As per reports by Nielsen, a market research firm, the contribution of e-commerce to total FMCG sales is expected to go up to 11 percent by 2030.

With huge opportunities for growth and development in the e-commerce segment, the competition in the FMCG sector is set to become tighter where both offline and online retail strategies will hold the key.

The Unprecedented Growth of E-Commerce

E-commerce is gradually transforming how business is done in India. From $38.5 billion in 2017, the Indian e-commerce market is expected to reach $200 billion by 2026. Growing at a YoY rate of 5 per cent, the e-commerce market in India is expected to become the second-largest by 2034, surpassing that of the United States. The e-commerce trend is gaining immense popularity even in the Tier 2 and Tier 3 cities of the country as they now make up nearly half of all shoppers and contribute three of every five orders for leading e-retail platforms. With the end of the COVID-19 pandemic, the figures are expected to become further impressive as e-commerce is expected to cross 10 per cent over the coming years from the present share of 4-5 per cent.

How E-Commerce Trends will Positively Impact FMCG Businesses

Digital innovation and the growth of e-commerce has led to the emergence of several new players in the market who are giving stiff competition to existing players. With differentiated business models optimised to serve the rising demands of the present consumer, these players are expected to contribute to more sales for the FMCG sector over the coming years.

Apart from that, new and existing players are re-inventing their business processes by forming links with stable and bigger e-commerce businesses. New e-commerce start-ups also helping local kirana stores to expand their operational footprint through digitisation. With the development of e-commerce platforms for grocery stores and local retailers aggressively underway, it is further going to contribute to sales and overall business growth in the FMCG sector.

As a growing number of consumers are opting for contactless and safe deliveries through e-commerce channels, online platforms, as well as local neighbourhood stores, are also witnessing an uptick in demand. Enhanced product information and valuable reviews are some of the other factors that are driving consumers towards online shopping.

The landscape of shopping has dramatically transformed over the last few months. While retail still holds a lot of significance, e-commerce has taken off and is expected to further aid FMCG brands in driving sales, increasing market share and attracting new customers. With e-commerce encouraging a direct-to-customer (D2C) model, FMCG businesses are benefitting in different ways such as:

Better Monitoring: It becomes difficult for companies to monitor their product once it hits the shelves. While retailers remain aware of how a brand is perceived by customers but manufacturers remain oblivious to it. With the D2C model, the gap is bridged wherein companies have better knowledge of what customers perceive and more control over message and packaging marketing.

Quickly Reach Out to Consumers: With the help of the D2C model, companies are able to reach out to consumers quickly with their products as compared to the traditional model. This also enables the companies to earn higher profits as no middlemen are involved. Also, D2C helps businesses to reach out to their customers in small quantities initially, and depending on market reaction, make necessary adjustments to cut down their risk.

Building Trust: With consumers hopping to brands official websites, companies are able to gather valuable information all under one roof. This is proving to be a great opportunity for businesses to connect better by offering seamless user experience, interface and build enhanced trust and leverage it into more profitability.

An Omni-Channel Strategy is Important

While there is no doubt that e-commerce is all set to play a big role in the growth of FMCG businesses but to maximise efficiency, an Omni-channel approach is required. It isn’t just about replicating an offline strategy – a personalised experience for the consumers is essential. From product pictures to precise and clear brand descriptions to various product portfolios for digitised platforms, FMCG businesses should look to enhance the scope of their online offerings by increasing coverage for delivery; offering more convenient and quicker delivery options; and providing items or products that are hard to find offline.

(This article is authored by Manish Aggarwal, Director, Bikano, Bikanervala Foods Pvt Ltd.)